There is one thing always confused me: People always say that financial crisis destroyed trillions dollar worth of wealth
Based on general economy definition, only consumable goods and services are wealth, money is just a medium of exchange. So, if a house used to worth 5 million now worths 3 million, the actual wealth (the house) do not change, it is just the price of the house changed, and I think this price change are mainly caused by two things: money supply and people's desire
What happens is that people
realize the lost, which has already been done in the form of wasted resources. These resources were employed in bad investments, which had not enough returns.
Bad investments occur all the time, but when they occur massively like in an boom-and-burst, that's because something interfered with prices, making people take decisions they otherwise would not. (if prices were a correct indicative of supply and demand).
Also, try to keep the ideas of wealth and capital clear in your mind. Invested capital can multiply the wealth created through work. If capital is misinvested, that capital is wasted right away, but it won't be obvious until the dreamed of gains fail to appear. Bad signals and denial can keep those losses off the books for months, years, or even decades.